In our municipality, they keep the weed in their evidence room for a long, long time, supposedly until all the pertinent court proceedings are over. I've never heard of them destroying it, but I know they're supposed to. Evidence rooms get broken into all the time and weed gets stolen, not only by civilians but by pot-smoking cops!

Here in Texas, some portion of the drug money that is seized (they seize a LOT of cash) is kept by the municipality/police department and another portion is used to help fund anti-drug teaching programs like our old friend DARE, which everyone knows is SO successful (not!).